1.

1 What is a Business

O1: The nature of business (AO1)

Business: A business is an organization that provides goods and/or supply

services to meet a customer's need, aiming primarily to make a profit (for-profit
business) or to achieve a benevolent objective (non-profit business).
 It can be micro, small, medium, or large with structures ranging from a
one-person operating to a complex corporation.

How are Businesses EXTREMELY Beneficial?

 In essence, it's the engine that drives the economy through production,
buying and selling, and employing people.

Transition = For a Business to provide goods and/or supply services, it needs to

combine a set of resources which are referred to as the Factors of Production.

Factors of Production:
1) Land: all natural resources used in the production process such as wood,
water, physical land, fish, minerals, oil, soil etc.
2) Labor: the human physical effort and intellectual skills used and applied in
the production process.
3) Capital: the non-natural (also called manufactured resources or physical
capital) and financial resources used to produce goods and/or services.
 Non-natural resources include tools, equipment, machinery,
vehicles, buildings, and technology used in the production process.
 Financial resources refer to the money used to conduct the business
activity.
4) Enterprise (or Entrepreneur): an individual with the necessary skills and
abilities, who takes the risk of combining and organizing the factors of
production to generate an output.
In which process do they take part? In the Input/Output – Transformation –
Production Process (different titles referring to the same process):

Transition = The production process is what adds value to the final goods and
services sold to customers.

Value Added: it’s the extra worth you add for something by transforming it into
something more useful or desirable. A painted canvas is worth more than a plain
one; an orange juice is worth more than oranges grown in the farm. Hence, the
production process takes the inputs (factors of production) in raw materials, adds
value to them by converting them into a final product that is perceived as different
from the initial outputs.
 How to calculate it: Price per unit - Cost of the inputs used per unit

Transition = Since this would be too much for the entrepreneur to handle alone,
the entrepreneur decides to organize the business activity into distinct functions
(or departments), which he manages from the top, to reach a final output more
effectively and efficiently.

Functions of a Business:

1) Human Resources: this is responsible for managing and handling the

organization’s labor. Their jobs include recruitment, dismissal, training and
 development, appraisal, career planning, and the general welfare (well-
being) of the organization’s employees.
2) Finance and Accounts: this is responsible for managing the business
financial resources (financial capital), making sure it has enough cash,
spends wisely, and grows its wealth. Also, it’s responsible for the
payments of the business and for securing enough funds for the business
to sustainably conduct its activity. The Accounting department prepares
the financial statements of the business which are analyzed by the Finance
department to take decisions.
 In big businesses, these are 2 distinct functions.
3) Marketing: this is responsible for identifying the needs and wants of the
customers (through market research) and ensuring that the business’s final
product meets these needs and wants in a profitable way. It conducts
promotional activities to sell the firm’s products at appropriate prices,
distributed to customers at the right time and place.
4) Operations Management: this is responsible for producing the products
through the available resources of the business. Hence, it’s responsible for
manufacturing finished goods or providing services to the organization’s
customers. Its role includes stock control, achieving production targets,
and meeting quality standards.

TIP – Difference between Consumers and Customers:

 Consumers (users) are the people who use and consume the good or
service.
 Customers (buyers) are the people who buy a good or service.
 Thus, buyers and users are not necessarily the same entities.
O2: Primary, secondary, tertiary and quaternary sectors
(AO2)

Sector: It’s a classification based on specific criteria under which businesses

who commonly fulfill the same classification criteria are grouped together under
the same sector title.

Transition = the sectors we’ll see below are classifications of businesses based
on the product they sell.

4 Economic Sectors:
1. Primary Sector (Goods):
 It groups all businesses involved in the first stage of production.
 Businesses working in the Primary sector are the ones who are
involved in the extraction of natural resources and raw materials.
This includes businesses working in farming, fishing, forestry, and
mining.
 In less economically developed (low income) economies, most
people are employed in the primary sector since it doesn’t require
high-level education nor prior expertise.
 Value added in the primary sector is very low compared to the other
sectors since there is not much transformation (the obtained material
is sold almost directly).
2. Secondary Sector (Goods):
 Businesses working in the Secondary sector are engaged in the
manufacturing and construction activities, which create finished and
usable products.
 It involves the businesses who use primary products and
components bought from businesses working in the primary sector
and transform them into products for sale.
 This includes car making, aerospace manufacturing, construction
(house building, road building, ship building, and other forms of
infrastructure), and others.
  In many parts of the world, the implementation of mechanization and
automation in the secondary sector have caused a decline in
employment in that same sector.
3. Tertiary Sector (Services):
 The Tertiary sector is also known as the traditional service sector,
providing a broad range of services that cater to customers'
(individuals or businesses) needs. Hence, it involves the services
needed daily by the society to continue running smoothly.
 It cares for customers’ everyday needs which include services such
as food services, real estate, entertainment, security services, hair
and beauty salons, and funeral services.
 While some aspects of telecommunication, such as research and
development of new technologies, may align with the quaternary
sector's emphasis on knowledge-based activities, the core function
of telecommunication is the provision of basic and necessary
communication services to individuals, businesses, and other
organizations; thus, making it suitable to fall under tertiary sector.
4. Quaternary Sector (Services):
 The Quaternary sector is an improved form of tertiary sector as it
encompasses services related to knowledge creation and
application of highly sophisticated technology.
 Hence, they are high knowledge-based services such as information
technology, research and development, education (which focuses on
research and knowledge creation), healthcare (especially advanced
media fields including a high level of technology), software
development, and data analytics.
 In other words, the value of this sector lies in the expertise and
intellectual capital used to create new knowledge or devliver highly
specialized services.
 The workforce who is readily involved in this sector is typically more
well-educated than the other sector, and people are often seen well
through their participation in industries operating in this sector.
Tip – the Classification of the Education industry:
 When education is focused on general instruction and basic qualification
(elementary schools, high schools, vocational training, undergraduate
university programs), they are considered under the tertiary sector.
 Yet, when it involves knowledge creation, information and specialization
(postgraduate studies, research universities, specialized training
programs), then it falls under the quaternary sector.

Tip – Relation between a Business, Industry, and Sector:

 Industry: it’s a group of businesses providing, more or less, the same
product.
 Economic Sector: it’s a group of industries having similarities in the
products (good and/or services) they produce. For example, fishing,
agriculture, and forestry are different industries but they are all working on
natural resources products, and hence can be classified together under the
Primary sector.

O3: Entrepreneurship (AO2)

Entrepreneurship: Entrepreneurship is the art and activity of turning an idea into

a business (called startup). This activity involves innovation, risk-taking, and the
drive to build something new and valuable.

To what extent is it important?

 It’s important to an extent that the economic success of countries
worldwide is largely the result of encouraging and rewarding an
entrepreneurial culture.
 It is entrepreneurs who take the risk of building businesses in search of
profit; this creates employment, satisfies the needs of customers,
decreases the need for imported products, and by then reduces the
demand on foreign currency which altogether lead to the prosperity of the
economy.
Job of Entrepreneurs: Entrepreneurs (the people who execute the
entrepreneurship activity) assemble and then integrate all the resources needed
– the money, the people, the business model, the strategy – and go through the
whole journey of transforming an invention or an idea into a viable business.

Are Entrepreneurs only limited to building new businesses? Not necessarily,

Entrepreneurs devise appropriate strategies to create new businesses and
commercial ideas, as well as to rejuvenate existing ones. This can include
identifying untapped opportunities (gaps in the market), developing new goods
and/or services, and creating new business processes.

Transition = With that being said, entrepreneurship can actually occur within big
established businesses, and not just the act of starting a new business
independently.

Corporate Entrepreneurship: It refers to the practice of developing new ideas,

innovations, and new businesses/ventures within an existing company.
 All firms fall along a conceptual continuum that ranges from highly
conservative to highly entrepreneurial.
 The position of a firm on this continuum is referred to as its entrepreneurial
intensity.
 Entrepreneurial intensity: measures the degree and frequency of
entrepreneurial activities within an organization. It reflects how often
and how strongly a company engages in innovative and
entrepreneurial actions.
 Thus, it allows us to place the company on a spectrum from highly
conservative to highly entrepreneurial.

Highly Conservative Highly Entrepreneurial features

features

 Take a more “wait and  Proactive

see” posture  Innovative
 Less innovative
 Risk averse  Risk taking
Transition = In order to become an entrepreneur, you need to acquire some skills
and mindsets, including the ones below.

Entrepreneurial Mindset Entrepreneurial Skillset

A mindset is a set of attitudes, beliefs, A skill is a learned ability to perform

and ways of thinking that shape how a a specific task or activity. It is
person approaches situations, makes developed through training,
decisions, and interacts with the world. practice, and experience.
Mindsets influence behavior and how
individuals respond to challenges and
opportunities.

Having an entrepreneurial mindset Having an entrepreneurial skillset

includes: includes:

Attitudes and Beliefs: A positive Business Skills: Understanding

attitude towards risk-taking, resilience, business planning, financial
and a belief in one's ability to succeed. management, marketing, and sales.
Cognitive Processes: Creative thinking, Technical Skills: Specific technical
problem-solving, and the ability to see
expertise relevant to the
opportunities where others see
challenges. entrepreneur's industry or product.

Managerial Skills: Leadership,

Personal Traits: Characteristics such as
determination, persistence, adaptability, team management, project
and a proactive nature. management, and organizational
skills.
Motivation: A strong drive to achieve
goals, pursue passions, and a Networking Skills: The ability to
willingness to take calculated risks. build and maintain relationships
with clients, investors, partners, and
 other stakeholders.

Transition = We keep speaking of opportunity but what is really an opportunity

and how can we identity one?

Opportunity: An opportunity is a favorable set of circumstances that creates a

demand for a new product, service, or business.

How to identify an Opportunity?

O4: Challenges and opportunities for starting up a business

(AO2)

Does a startup remain always as such, or does it evolve in a known cycle?

Some companies might even have the "soul of a startup" label as a badge of
honor and inspiration, like old people like to remind themselves of being still
young 

What are the Opportunities for starting up a Business?

 To be your own boss, instead of working for someone
 To pursue a personal interest in the form of a business
 To enjoy more flexibility since it implies setting your own deadlines and
getting things done in your own way
 The opportunity to earn a lot of money
 To capitalize on a business opportunity/fill a gap in the market

Transition = given the positive side of starting up a business, is it easy to be

done or does it involve challenges? It involves challenges.

What are the Challenges for starting up a Business?

1. Finance challenges: they often struggle to secure external sources of
finance from banks and other lenders to fund their operations; in some
cases, they may not afford to get their needed set-up costs.
 a. Their business plans are often not convincing or detailed enough to
secure the necessary finance to get the business started.
2. Marketing challenges:
a. Limited budget available for promotion and advertising.
b. Product might lack differentiation or a distinctive selling point, thus
failing to gain market share.
c. A small customer base is likely the case in the beginning, which
causes liquidity issues.
d. Poor market research can result in a flawed business idea and the
product may fail to meet the needs and wants of customers.
3. Human Resources challenges:
a. New and unestablished businesses may struggle to recruit suitable
and experienced employees, due to their low popularity and their
inabilities to pay good salaries, compared to established businesses.
4. Operations Management challenges:
a. They usually lack the benefit of an established relationship with
suppliers (unless they have previous relationship with them), which
can cause delivery and distribution problems.
b. Defective products chances are higher due to low expertise, which
adds to the costs of operation.
5. Setting-up challenges:

The set-up procedures can be time consuming, especially if there are

complicated legal aspects to deal with.